An option spread is created when one option is purchased and another is sold simultaneously. The two options typically have different strike prices or expiration dates, and the trader who placed the spread order only has to come up with the cash difference between the option being bought and the one being sold. An option spread generally has a lower degree of risk and maximum profit potential than the outright purchase or sale of a single option.
Option Spreads
Terry's Tips Stock Options Trading Blog
May 17, 2013
Eight Consecutive Successful Earnings Plays and What We Learned
Note: There is a lot of valuable information in this report for anyone who trades stock options. It will take you about 15 minutes to read, but that investment in your time could be worth thousands of dollars to you down the line. I hope you will read it thoroughly all the way to the end.
On April’s Fools Day in 2013, we opened a new $5000 portfolio at Terry’s Tips. We thought that might be a lucky day to start. For several months we had been studying what happens just before and after a company announces their quarterly earnings, and this portfolio was designed to put our observations to work.
The biggest thing we discovered in our analysis was that . . .
May 13, 2013
Two Earnings Play for This Week – Deere and Sina
The Green Mountain Coffee Roasters (GMCR) spread I recommended last week resulted in a 20% gain. Not bad considering we were blindsided by their announcing a new 5-year deal with Starbucks that shot the stock 25% higher while we were betting on a lower post-announcement price. Our gain was not as great as last week’s 50% gain on Apple, but we will take 20% anytime (I’m sorry, but I executed the Apple spreads in a Terry’s Tips portfolio and did not share it with the free newsletter subscribers).
May 9, 2013
Update on the Green Mountain Coffee Roasters (GMCR) Trade
Update on the Green Mountain Coffee Roasters (GMCR) Trade
On Monday, I wrote to my free newsletter subscribers and recommended the following trade in advance of the company’s earnings announcement after the close on Wednesday:
Buy To Open 10 GMCR Jun-13 52.5 calls (GMCR130622C52.5)
Sell To Open 10 GMCR May2-13 57 calls (GMCR130510C57) for a debit of $3.70 (buying a diagonal)
This spread would make a gain for the week if the stock managed to . . .
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Making 36%
Making 36% – A Duffer's Guide to Breaking Par in the Market Every Year in Good Years and Bad
This book may not improve your golf game, but it might change your financial situation so that you will have more time for the greens and fairways (and sometimes the woods).
Learn why Dr. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA.
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